Estes Park Opinion

Colorado tax breaks for Hollywood

As the election season heats up, we can expect a lot of debate over the meaning of tax fairness.

Legislators are sometimes more interested in headlines than fixing Colorado's budget. Glamour can sell a bill as well as need.

Consider HB 12-1286, a bipartisan effort to create a tax credit for film productions. If it passes, the Colorado Office of Film, Television & Media will be able to offer up to $3 million in annual tax credits. Up to 20 percent of a film company's qualified local spending would be eligible for the tax credit. The law also would require a film company to use at least 50 percent Colorado residents as crew during local filming.

The bill's sponsors held a rally at the Capitol building on Wednesday attended by an unfortunate contingent of film students. No word on whether any actual Hollywood producers attended. The legislature then passed a unanimous resolution praising Colorado's film industry, a tactic intended to help pass the subsidy bill.

Why does Colorado want to subsidize movies? If you thought that movies were made on the basis of great stories and great talents, you would be wrong. State tax credits decide where movies get made.

Imagine you wanted to remake the Robert Redford movie "Jeremiah Johnson" about a fur trapper in Colorado. Filming in Colorado would be a natural choice. But where would you actually film the movie? Why Canada of course.

Think I'm exaggerating? Consider AMC's series "Hell on Wheels." The series follows a cast of characters building the eastern part of America's first transcontinental railroad.

Advertisement

The setting for season one of Hell on Wheels is Nebraska. The project is being filmed in Alberta. Hell on Wheels qualifies for subsidies from Alberta. Similarly, the movie "Battle: Los Angeles" was filmed in Louisiana of all places due to a 30 percent tax credit. It was cheaper to build Santa Monica in Louisiana than film in Southern California.

States are racing to get film projects. Forty-some states offer tax subsidies to filmmakers.

California increased its film tax credits in 2009 to fight the legion of competing subsidies. This month a California progressive think tank, The Headway Project, studied the impact of the increased tax credits. Headway concluded that every dollar in state tax credits generated $1.04 in total state and local taxes, producing a net gain. An industry-sponsored study reviewed by Headway pegged the number even higher at $1.13 per dollar of tax credits.

Most studies show unfavorable results. According to the Center on Budget and Policy Priorities, most states must cut spending elsewhere to pay for film subsidies. The Massachusetts Department of Revenue concluded that every dollar of tax credits generated less than 69 cents of income for Massachusetts residents. Other states outside of California estimated the revenue range at 72 to 93 cents per dollar.

Coloradoans should be asking how many tax-free or tax reduced industries can any given state support? At the end of 2011, California's unemployment rate was higher than 30 percent of the country. Their state budget is tanking. Some are suggesting that California could become the first state to seek bankruptcy.

Even modest tax breaks for Hollywood could be hell on wheels for Colorado taxpayers. Other states are already spending tens and even hundreds of millions of dollars on film subsidies, totaling $1.5 billion per year nationwide.

The mobility of filmmaking convinces lawmakers to keep increasing subsidies. Even with the requirement to hire locals, most of the local jobs will be neither stable nor high-paying.

Few states can really compete with Canada's aggressive tax breaks or with California's role in the filmmaking industry. There's nothing "fair" about cutting services or raising taxes on other businesses to garner some Hollywood glitz. Let's hope legislators study the economics of this bill rather than the glamour.